And the Lawsuit Goes To: Who Can Sue Whom Over Oscars Snafu?

There is rampant speculation within Hollywood that the Academy of Motion Picture Arts and Sciences, the organization that runs the annual The Academy Awards, will discontinue its eighty-year relationship with PricewaterhouseCoopers (PwC). PwC is the accounting firm which received the blame for the mistake two weeks ago, which led to the announcement of the incorrect name for “Best Motion Picture” on live television. However, when any long-term contract is severed a good lawyer always asks: Is there a lawsuit here?

When the 2017 Academy Awards aired on February 28th, the show seemed to be business as usual. Slightly funny monologues, polite clapping for the lesser known award categories and closeups on well-known celebrities as they pretend not to be bored (with the exception of John Legend’s wife Chrissy Teigen). However, that all changed when the “Best Motion Picture” award was announced. The announcement will go down in Academy Awards infamy, as the usual stodgy, buttoned-up show typically goes off without a hitch. By now you’ve already seen the awkward clip.

Warren Beatty gave the audience a pregnant and confused pause before finally passing the envelope to Faye Dunaway who proudly read that La La Land won the prestigious Oscar. While the romance film was the odds-on favorite to win, something was obviously amiss as the crew and cast members took to the stage. Ultimately, the crew was notified that the film was announced incorrectly, and the rightful recipient was the dark horse: the coming of age story Moonlight. The film, with a majority African-American cast, dealt with themes of sexuality and identity. Most generally perceived the film as having a long shot to win the most prestigious award of the night.

Although the audience no doubt enjoyed the unintentional plot twist at the end of the awards show, the incident was a public embarrassment for the 87-year-old Hollywood institution. Of course, mistakes occur and The Academy was surely due for one after so many years of perfection. However, when public flubs take place there inevitably will be someone or some organization that will be fired. Also, there’s no doubt someone will consult their attorney to determine if there are any damages involved. The Academy’s president Cheryl Boone Isaacs already made it crystal clear that the offending culprit is PwC. In doing so, she assured members that “changes will be made” to ensure that this will never happen again. Although Isaacs didn’t name PwC as the specific change, by reading between the lines one can come to the conclusion that The Academy will likely cut ties with the firm. PwC was given the important task of serving as custodian and managers of the winning envelopes.

Whenever a long-term employee is fired, the first legal point of inquiry is to determine the existing categorization of the employee under the law. In the United States (and under federal law), employees can be broadly classified into two categories:

(1) at will employees and (2) just cause employees.

An “at will employee” is one that can be fired for any reason or no reason at all and can leave his/her job at any time without giving notice.

A “just cause” employee, on the other hand, can only be dismissed for not performing their job duties correctly or other non-arbitrary reasons relating to violations of workplace conduct or policy.

In recent years, court rulings have made it more difficult for organizations to use an Employment-at-Will policy, as the policy has opened both employees and employers up to unneeded and burdensome litigation. There’s almost no doubt that PwC is employed by the Academy as a just cause employee. Therefore when analyzing this particular situation it is reasonable to believe that the Academy’s potential firing of PwC would likely constitute termination for good cause under its contract with the organization. In fact, PwC issued multiple statements, falling on its own sword and taking full blame for the situation. Therefore, the firm has not shown any indication of jumping at the chance to litigate such a public embarrassment to their respected company.

The only chance that PwC could have a successful lawsuit or even one that would be heard by a Civil Court, is if the contract signed by Academy and PwC contained ambiguous language regarding what “just cause” is. “A well-drafted “just cause” provision in an employment contract lists the basis for termination in ways that are objectively definable.” explains Attorney Neal T. Buethe, head of the Briggs and Morgan Law’s Employment, Benefits and Labor section. He adds, “In extreme situations, such as conviction of a felony or misappropriation of funds, the definition can be set forth in a very straight-forward way. But in situations that sound in dissatisfaction with the employee’s performance, disputable subjective elements can creep in.”

Unfortunately for Brian Cullinan, Chairman of PwC’s US Board and Managing Partner of PwC’s Southern California, Arizona & Nevada Markets, his malfeasance may be easy to prove. There are pictures floating around the internet purporting to show the accountant tweeting photos of actress Emma Stone around the exact time he was supposed to be handing Warren Beatty the best picture winner envelope. As a result, he is widely considered to be the person responsible for the flub. PwC has even been receiving threats of violence towards Cullinan and according to THR, private security has been hired to protect him.

Image via ANDREW WALKER/REX/SHUTTERSTOCK

Either way, it will benefit both the Academy and PwC to keep quiet about the entire situation until it is worked out behind closed doors. Passing the blame solely to an employee of the company could open the organizations up to litigation. “If in fact, [Cullinan] was not responsible, he may have a claim against Pricewaterhouse or the Academy for defamation,” says Gina Roccanova, chair of Meyers Nave’s labor and employment group. “A lot of it will hinge on whether he messed up the way everyone is saying he did.” Hirschfeld Kraemer partner Daniel Handman adds, “Theoretically, if there was a public statement — or even an implication — that this person was responsible for the screw-up and that wasn’t true, that could lead to liability for defamation. If it were me, I would want that story to die down as quickly as possible. Bringing a lawsuit is the worst way to accomplish that goal.”

Alternatively, the Academy may be able to sue PwC in order to lower its invoice price or even eliminate it all together. The suit would be based on a simple Breach of Contract legal theory. The much-discussed Breach of Contract elements include:

(1) the existence of a contract,

(2) plaintiff’s performance or excuse for nonperformance,

(3) defendant’s breach, and

(4) damages to plaintiff therefrom.

The Academy would be likely to succeed under the breach of duty portion of California Civil Code Section 3300. However, experts are speculating that the firm may either offer a discount or even a total waiver of fees for the event, in order to avoid a lawsuit or a last-ditch attempt to keep their contract with the Academy.

While on the surface it may seem that no person nor company is above initiating a lawsuit or being sued, the facts show quite the contrary. Large and storied organizations are some of the most litigious groups in the country. They are fiercely protective of their name, brand and of course, their money. However, in this particular case, it may serve both companies well to fix this mishap behind closed doors, sign non-disclosure agreements and move on.

Chad H. Jordan is a graduate of Texas Southern University, Thurgood Marshall Law School, in Houston, Texas. The Louisiana born and bred attorney, grew up with an equal love of law and music. The son of an attorney, Chad soaked up the unique culture and music that exists in New Orleans. After his graduation from law school in 2009, Chad has stayed close to his love of music by writing about the latest releases for such prominent blogs as Hypebeast and Hypetrak. Through out his tenure as an attorney, Chad has developed an expertise in negotiating and drafting contracts for recording artists, and drafting and negotiating sports agency agreements.